When a reliable pessimist turns discernibly optimistic it is worthy of note. Ambrose Evans-Pritchard is such a one, in his recent column on “the American phoenix.” His adducement of the stirrings of a natural resource boom in the United States is abetted by reports from various sources.
Consider some samples:
He suggests that “the China-US seesaw is about to swing the other way. Offshoring is out, ‘re-inshoring’ is the new fashion.” He cites a report, “Made in America, Again” out of Boston that alleged “Chinese wage inflation running at 16pc a year for a decade has closed much of the cost gap.” Nothing to sneeze at. Labor’s comparative advantage switches rapidly. Indeed, “China is no longer” what we might call “the default location” for firms seeking “cheap plants” to supply the US.
Such industries as “computers, electrical equipment, machinery, autos and motor parts, plastics and rubber, fabricated metals, and even furniture” approach a “tipping point.” The evidence: the “gap” (economist-speak) “in productivity-adjusted wages” for China “will narrow from 22pc of US levels in 2005 to 43pc (61pc for the US South) by 2015.” What’s more, “shipping costs, reliability woes, technology piracy” conduce to an state of affairs where “advantage shifts back to the US.”
Should that prediction come true, we can thank Ben Bernanke and his helicopters for the revival of American manufacturing industry. The dollar fell against the yen to a record low today. This indicates that, especially in Asia, companies selling from dollars into Asian markets are benefited, ceteris paribus, by the currency environment.
The list of “repatriates” is growing. Farouk Systems is bringing back assembly of hair dryers to Texas after counterfeiting problems; ET Water Systems has switched its irrigation products to California; Master Lock is returning to Milwaukee, and NCR is bringing back its ATM output to Georgia. NatLabs is coming home to Florida.
One consistent point of my amateur analysis of world political economy since the shock and crash of 2008 may be summed up as a spellbound awe at the capacity of fact to lay waste to theory. Facts are pulverizing; human predictions are easily ground to bits. Perhaps this weak-dollar trend will reverse and labor parity vanish from discourse. But if it does not, we’re in for some theory-busting facts to roll through this place. We could devalue our way out of this debt mess; and then check that risk by emancipating the ingenuity of America to exploit the valuable resources right under our noses, which we’ve only begun to discover. Look at the facts, again:
“The US was the single largest contributor to global oil supply growth last year, with a net 395,000 barrels per day (b/d),” said Francisco Blanch from Bank of America, comparing the Dakota fields to a new North Sea. Total US shale output is “set to expand dramatically” as fresh sources come on stream, possibly reaching 5.5m b/d by mid-decade. This is a tenfold rise since 2009.
So there is a positive policy toward recovery: weak-dollar and a natural-resource boom. We’ll grow out of this usury crisis: we'll do it by empowering our merchants, particularly our energy merchants. I offer it in that spirit of skepticism that I have indicated behooves us regarding all predictions which ground policies.